Daily Commentary - 21 February 2019
Merchant West Capital Markets
USD/ZAR 14.1226 | EUR/ZAR 16.0214 | GBP/ZAR 18.4401
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21 Feb - EC German CPI; Markit PMI | US Initial Jobless Claims ;Markit PMI
22 Feb - EC CPI Data | US Industrial Production ;Total Net TIC Flows
USDZAR: Going into the Budget yesterday the Rand traded somewhat defensively in the morning as expected moving from the 14.05 levels to 14.17. Then in a frantic few minutes on the back of the paper budget speech being released to the market, the local currency moved 20-big figures all the way to trade at the highs of 14.37 in what felt like it was all doom and gloom and the ZAR on the run. This was however short-lived as soon as the Minister of Finance started speaking and soothing onlookers with ZAR rallying close to 3% from the highs to trade below the 14.00 handle, where we saw some decent buying of the USD vs. ZAR. The events of the day had us scratching our heads with ZAR assets closing stronger on the day. Where to next? We expect risks to remain to the upside with the Eskom issues not going anywhere, anytime soon – investors will be dissecting and debating the budget even further in the coming few days with a touch of mixed feelings. The ball is now in Moody’s court on whether Minister Mboweni did enough to address their concerns of if they will go ahead and crack the whip by issuing a negative outlook in the coming weeks (our base case scenario).
Asian shares pulled ahead to fresh 4-1/2-month highs and U.S. equity futures rose on a Reuters report that the United States and China have started to tackle the stickiest issues in their trade war. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent, giving up some earlier gains after hitting a peak last seen in early October. Australian shares gained 0.7 percent, closing at a six-month high, but the Australian dollar tumbled sliding on fears a ban on the country’s coal by a Chinese port would hurt its already slowing economy. Japan’s Nikkei ended 0.1 percent higher. U.S. stock futures gained 0.2 percent. Hong Kong’s Hang Seng rose 0.1 percent, while Chinese blue-chips were last down 0.2 percent, giving up their gains after hitting their highest since early August last year.
Sentiment also got a lift after the U.S. Federal Reserve on Wednesday affirmed it would be “patient” on further interest rate rises. “We must be a little bit careful that if the trade negotiation would be ended with a temporary success, that could in turn mean the Fed might restart their monetary tightening,” said Yoshinori Shigemi, a global market strategist at JPMorgan Asset Management in Tokyo. On Wall Street, all three major U.S. equity indexes ended in positive territory on Wednesday after minutes from the Fed’s Jan. 29-30 meeting indicated policymakers see little risk to leaving rates alone, for now. “The bar to restarting rate hikes in the near term seems to be quite high, with several participants arguing that rate increases would be necessary “only if inflation outcomes were higher than in (the) baseline outlook”,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a note. “The upshot is we now expect the Fed to leave rates unchanged throughout this year, before a further deterioration in economic growth forces it to cut rates by a total of 75 basis points in 2020,” he said. The Fed signaled it will soon lay out a plan to stop letting go of $4 trillion in bonds and other assets, though policymakers are still debating how long their newly adopted “patient” stance on U.S. rates will last. (Reuters)
Our Range for today: R13.9000 - R14.3000